Britain and Iceland have resumed talks aimed at settling a £2.3 billion dispute over the collapsed Icesave bank.

The Icelandic Ministry of Finance said that it had met with representatives of the UK and the Netherlands - who also say that they are owed money - in the capital, Reykjavik, on Thursday and Friday.

It is the first time the three sides met since March when the talks collapsed after Icelanders voted to reject a deal to repay the British and Dutch governments for compensating their citizens who lost their deposits when Icesave collapsed in 2008.

Foreign Secretary William Hague signalled that Britain is prepared to block Iceland's accession to the European Union unless the dispute is resolved.